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The Shape of Things to Come?

Once normalcy returns, what will the financial sector look like and how will it behave? Suggestions are beginning to emerge that the future will look far different than the past.

"We are going to have to create whole new ways of securitizing and funding debt of all types, but especially mortgages and consumer credit. ...It is going to take time to replace a system that took decades to build," writes Bethany McLean of CNNMoney. Profits in the financial sector had increased far beyond historic levels; if earnings return to sustainable levels, the subsequent shakeout is likely to have fundamental ramifications.

The advent of securitization led to a mindset among frontline lending officers that the money they were lending, since its underlying collateral was ending up in some distantly-removed asset pool, would allow the good loans that somebody must be making to carry the questionable loans that they themselves were making. As has become grimly obvious, however, that mindset only has any degree of validity in an up-market.